EN BANC

[G.R. NO. 158791 : February 10, 2006]

CIVIL SERVICE COMMISSION, Petitioner, v. DEPARTMENT OF

BUDGET AND MANAGEMENT, Respondent.

RESOLUTION

CARPIO MORALES, J.:

Before this Court is the Motion for Reconsideration of respondent

Department of Budget and Management (DBM) praying that this
Court reconsider its Decision dated July 22, 2005 (the Decision)
granting the subject petition.

The DBM assails this Court's interpretation of Article IX (A) Section

5 of the Constitution, Sections 62, 63, and 64 of the FY 2002
General Appropriations Act (R.A. No. 9162), and the Resolution of
this Court in A.M. No. 92-9-029-SC (Constitutional Mandate on the
Judiciary's Fiscal Autonomy) dated June 3, 1993.

The DBM posits that this Court's ruling that fiscal autonomy means
preference in terms of cash allocation is not supported by the
deliberations of the 1986 Constitutional Commission, particularly
the discussions on the draft article on the Judiciary where the
concept of fiscal autonomy was, by its claim, introduced.

The DBM cites the comments of then Commissioner Blas Ople

expressing concern over "the propensity throughout this Article in
its various provisions to accord the Supreme Court, the lower courts
and the judicial system as a whole, a whole plethora of privileges
and immunities that are denied the rest of the government of the
Republic of the Philippines."1

A close reading of Commissioner Ople's comments shows, however,

that he was not questioning nor seeking to qualify the concepts of
"fiscal autonomy" and "automatic release" as provided for in what is
now Article VIII Section 3 of the Constitution.2 What was then under
consideration was the original draft article on the Judiciary which,
with regard to appropriations, provided as follows:

Section 15. An amount equivalent to not less than two percent of

the national budget shall be automatically appropriated and
regularly released for the judiciary. (Underscoring supplied) cralawl ibra ry

What the original draft thus provided for was automatic

appropriation, which is not the same as automatic release of
appropriations. The power to appropriate belongs to Congress, while
the responsibility of releasing appropriations belongs to the DBM.
Commissioner Ople objected to automatic appropriation, it bears
emphasis, not to automatic release of appropriations.

It was Commissioner Christian Monsod who proposed the substitute

provision that is now Article VIII Section 3 providing for "fiscal
autonomy" and for automatic and regular release of appropriations.

In support of its position, the DBM also cites Commissioner

Monsod's explanation that "[t]he whole purpose of that provision is
to protect the independence of the judiciary while at the same time
not giving the judiciary what we call a position of privilege by an
automatic percentage." Again, what Commissioner Monsod objected
to was automatic appropriation for the judiciary, not automatic
release of appropriations once approved. The following statement of
Commissioner Monsod, read in its context, does not in any way
support the position taken by the DBM.

The Commissioner will recall that when the provision giving fiscal
autonomy to the judiciary was presented to the body, we were the
ones who denied to it the percentage of the budget because,
precisely, we wanted the judiciary to go through the process of
budget-making to justify its budget and to go through the
legislature for that justification. But we also said that after having
gone through this process, it should have fiscal autonomy so that
there will be an automatic and regular release of such funds.
The whole purpose of that provision is to protect the
independence of the judiciary while at the same time not giving
the judiciary what we call a position of privilege by an automatic
percentage.3 (Emphasis and underscoring supplied) cralawl ib rary
The DBM further claims that the constitutional mandate to
automatically and regularly release funds does not preclude the
implementation of a cash payment schedule for all agencies,
including those belonging to the constitutional fiscal autonomous
group (CFAG). It explains the meaning of "cash payment schedule"
in the context of the budgetary process, from the enactment of the
general appropriations law to the release of appropriations, thus.

After the General Appropriations Act (GAA) is signed into law, this
Department, in coordination with the agency concerned, prepares
the financial plan for the year in accordance with its appropriations
under the GAA. The result of this exercise is embodied in
the Agency Budget Matrix or ABM which reflects the individual
obligation authority ceilings of the agency, called the allotment.
An allotment allows the agency to enter into a contract or
otherwise obligate funds although cash has not yet been received by
said agency. Simply put, allotments serve as a guarantee that the
national government will look for cash to support the agency's
obligations. Therefore, the closer the allotment is to the amount of
its appropriation, the better.

The approved allotment of an ordinary agency does not cover its full
appropriations, while those for entities vested with fiscal autonomy
always cover the full amount of its appropriations. For instance,
allotments for Personal Service of an ordinary agency only cover
those for filled positions. In contrast, the Personal Service
allotments of agencies enjoying fiscal autonomy are
comprehensively released, including those for positions that are
admittedly vacant. At the end of the year, whatever is unspent for
Personal Services, particularly for unfilled positions, translates to
savings, which may be used to augment other items of
appropriations.

As emphasized, the ABM of an ordinary agency is disaggregated into

those Needing Clearance and Not Needing Clearance. Pursuant to
Budget Execution Guidelines no. 2000-12 dated August 29, 2000 x
x x, the full allotment of entities belonging to the CFAG is placed
under the Not Needing Clearance column.
Finally, items under the Not Needing Column of an ordinary agency
is further disaggregated to "this release" which represents the initial
allotment authorized under the ABM, and "for later release" which
represents the amount to be released after the conduct of the
agency performance review. In contrast, the total appropriation and
allotment of entities belonging to the CFAG are all placed under
"this release" since no agency performance review is conducted by
the DBM on these entities.

xxx

Thus, in order to ensure that the budgets of agencies vested with

fiscal autonomy are released in full, the DBM in a ministerial
capacity, ensures that the allotments of agencies belonging to the
CFAG (i) cover the full amount of their annual appropriations, and
(ii) are not subject to any condition. In other words, budgets of
fiscal autonomous agencies occupy the highest category in terms of
allotment.

xxx

After the ABMs are issued, the Notices of Cash Allocations

(NCAs) are issued every month to support approved allotments
with cash.

Ideally, the NCA should cover in full the monthly allotment of

the agency. The reality, however, is that every national
budget is based on revenue projections, and that there is an
ever present risk that these revenue targets are not met in
full during the course of the budget year. Last FYs 2001 and
2002, for instance, revenue shortfall was at 7.16% and 9.16%,
respectively, as shown below under Table 2.

xxx

Further, not all revenue collections are received at the start of the
budget year. The cash flow of the national government, like most
other public institutions, has its highs and lows depending on the
tax calendar. Thus, not all of the projected revenues are available
for spending at the start of the budget year.
It thus becomes imperative for the Executive Department,
through the DBM, to manage the release of funds through
implementation of cash payment schedules. For instance, if
collections for a given month meet the monthly revenue target,
then the NCA for that month shall cover 100% of the allotment. If,
however, collections do not meet the monthly revenue target, then
the NCA to be released may not cover 100% of the allotment. Add a
few more variables, such as amount of deficit and total
disbursement of agencies, then one gets a cash payment schedule
that varies on a monthly basis.4 (Emphasis and underscoring
supplied)cralawlibra ry

The DBM goes on to emphasize that it has no discretion on how

much cash enters petitioner's coffers, as cash payment schedules
are "dictated by the amount of revenue collection, borrowings,
deficit ceilings and total disbursement program of the national
government"5 ; and if the cash payment schedule prescribes that
the total cash to be released for a given month is 85% of allotment,
then a Notice of Cash Allocation amounting to 85% of each agency's
allotment is released for all agencies. It thus contends that this
equality in treatment does not violate the fiscal autonomy of the
agencies belonging to the CFAG, for "since approved allotments of
agencies belonging to the CFAG are higher than ordinary agencies,
they automatically get higher cash allocations."6

The DBM's protestation that it has no discretion on the amount of

funds released to agencies with fiscal autonomy fails. The Court
finds that the DBM, in fact, exercised discretion denied it by the
constitutional mandate to automatically release such funds.
Understandably, a shortfall in revenue in a given year would
constrain the DBM not to release the total amount appropriated by
the GAA for the government as a whole during that year. However,
the DBM is certainly not compelled by such circumstance to
proportionately reduce the funds appropriated for each and every
agency. Given a revenue shortfall, it is still very possible for the
DBM to release the full amount appropriated for the agencies with
fiscal autonomy, especially since, as noted in the Decision, the total
appropriation for such agencies in recent years does not even reach
3% of the national budget.7 That the full amount is, in fact, not
fully released during a given fiscal year is plainly due to a
policy decision of the DBM. Such a decision, whether it goes by
the label of "cash payment schedule" or any other term, cannot be
reconciled with the constitutional mandate that the release to these
agencies should be automatic.

Respecting this Court's observation that Sections 62, 63 and 64 of

the General Provisions of the FY2002 GAA reflect the legislative
intent to except entities with fiscal autonomy from the possibility of
retention or reduction of funds in the event of an unmanageable
budget deficit, the DBM comments as follows:

Unfortunately, the sponsorship speech of Cong. Rolando G. Andaya,

Jr. Chairman of the House Committee on Appropriations in justifying
the introduction of Sections 63 and 64 (sic) in the FY 2002 GAA,
belies such contention. x x x In his speech, he states that the
incorporation of Section 62 is due to concerns raised by
Congressmen on the general impoundment powers of the President,
without distinguishing as to the two types of public
institutions. More revealing is his explanation in introducing Section
63, which defines unmanageable national government deficit. He
states that in order to discourage the Executive Department from
reducing the Internal Revenue Allotment of local government units,
there is need to define the legal parameters of "unmanageable
deficit". Reference to local government units, which likewise enjoy
fiscal autonomy according to the pronouncements of this Honorable
Court [Pimentel, Jr. v. Aguirre, 336 SCRA 201 at 218
(2000)], reveal the true intent of Congress to cover both agencies
vested with fiscal autonomy and those without. x x
x"8 (Underscoring supplied) cralawlib rary

The Court, however, has examined the speech of Congressman

Andaya and finds nothing therein that detracts from its ruling. It
bears emphasis that this Court explicitly observed that Sections 62
and 63 refer to government agencies in general, while Section 64
applies specifically to agencies with fiscal autonomy. It is in these
three provisions read together, and not in reading each one in
isolation, that the distinction intended by the legislature becomes
evident.
When Congressman Andaya introduced Sections 62 and 63, he was
thus speaking of government agencies in general. If he did not then
expressly distinguish between agencies with fiscal autonomy and
those without, it was because there was no pressing need for him to
do so. Particularly with regard to Section 62, his speech would
reveal that his attention was on a matter that did not call for such
distinction, namely, the "deep concern, frustration and despair"
expressed by numerous members of Congress "over the
impoundment of appropriations by the Department of Budget and
Managementand the Office of the President" which, he explained,
provided the reason behind Section 62 of the GAA.

As for the mention of local governments in Congressman Andaya's

introduction of Section 63, the same does not imply that said
provision was meant to include the agencies belonging to the CFAG.
In fact, his speech even suggests that Section 63, rather than itself
being an authorization to the DBM to withhold or reduce
appropriations, was merely intended to set a guiding principle for
the DBM in those cases where it already has authority to withhold or
reduce such appropriations.

In the case of LGUs, the Congressman explicitly referred to "the

provisions of the Local Government Code, R.A.
7160which authorizes the reduction of the IRA in the event that
there is an 'unmanageable deficit' of the National Government."9 He
then stated that Section 63 was prompted by the need to set
parameters in determining the existence of an "unmanageable
deficit."

On the other hand, there is no similar authorization for such

reduction in the case of agencies belonging to the CFAG - not even
during an "unmanageable deficit" - either in the Constitution or in
statute. Thus, notwithstanding the inclusion of LGUs, there is no
basis for supposing that the agencies belonging to the CFAG are
also covered by Section 63 of the GAA.

The DBM furthermore argues that this Court's Resolution of June 3,

1993 in A.M. No. 92-9-029-SC10 (the Resolution) reading:
After approval by Congress, the appropriations for the Judiciary
shall be automatically and regularly released subject to availability
of funds. (Underscoring supplied) cralawlib rary

means that fund releases may still be subject to a cash release

program.

In support of this argument, the DBM cites a letter dated May 18,
1993 of then Chief Presidential Legal Counsel Antonio T. Carpio
(now a member of this Court) to the Secretary of Budget and
Management, regarding A.M. No. 92-9-029-SC then pending with
this Court.

The letter quotes then Chief Justice Narvasa's summary of this

Court's position on the controversy, which summary states, inter
alia:

"4) the Court will look to releases by the DBM of funds against the
approved budget of the Judiciary, in the full amount sought
and promptly upon notice; it is willing to consider and pass upon
suggestions by the DBM for scheduling of releases; x x
x"(Underscoring supplied) cralawlib rary

In the same letter, the Chief Presidential Legal Counsel, after

considering the Court's position, opined that one of the principles by
which the constitutional mandate on judicial fiscal autonomy can be
achieved is that "[a]fter approval by Congress, the appropriations
for the judiciary shall be automatically and regularly released
subject to availability of funds" - which opinion, the DBM alleges, is
the position adopted by this Court.

Instead of supporting the DBM's position, however, this letter only

shows the consistency of this Court in interpreting "automatic
release" as requiring the full release of appropriations. The Court's
willingness to pass upon suggestions for scheduling of releases in no
way implies that it was assenting to an incomplete or delayed
release of funds. Rather, it was a recognition by this Court that
scheduling of releases, as such, does not violate the Constitution
and is, in fact, presupposed in the phrase "automatically and
regularly released."
The phrase "subject to availability of funds" must thus be
understood in harmony with the constitutional mandate to
automatically release funds as the same has been consistently
interpreted by this Court. It is not an authority for the DBM to
implement a policy which, although labeled "cash payment
schedule," actually goes beyond mere scheduling of releases and

effects a withholding and reduction of the approved appropriations,

as it did in the present case against petitioner Civil Service
Commission.

Finally, while acknowledging the unconstitutionality of imposing a

"no report, no release" policy on agencies clothed with fiscal
autonomy, the DBM prays for a clarification that such agencies are
still responsible for the timely submission to it of financial reports.
The Court considers it sufficient to echo the following statements in
the Separate Opinion of former Chief Justice Hilario G. Davide, Jr.:

This is not to say that agencies vested with fiscal autonomy have no
reporting responsibility at all to the DBM. This is precisely the
reason why guideline No. 5 under the Resolution of 3 June [1993
states that the Supreme Court, or constitutional commissions
clothed with fiscal autonomy for that matter, may submit reports
relative to its appropriation "for records purposes only." The word
"may" is permissive [Dizon v. Encarnacion, 119 Phil. 20, 22
(1963)], as it is an auxiliary verb manifesting "opportunity or
possibility" and, under ordinary circumstances, "implies the possible
existence of something." [Supangan, Jr. v. Santos, G.R. No. 84663,
24 August 1990 x x x Interdependence will work only if it is
undertaken within the parameters of the Constitution."

WHEREFORE, the Motion for Reconsideration of respondent

Department of Budget and Management is DENIED.

SO ORDERED.

Endnotes:

* On Sick Leave.
**
On Leave.

1 I Record, Constitutional Commission 467 (1986).

2 "The Judiciary shall enjoy fiscal autonomy. Appropriations for the Judiciary may not be reduced by the legislature below
the amount appropriated for the previous year and, after approval, shall be automatically and regularly released."

3
II Record, Constitutional Commission 170 (1986).

4 Rollo, pp. 180-183.

5
Id. at 184 (underscoring supplied).

6 Ibid (underscoring supplied).

7The only exception would be the remote possibility noted in the Decision where total revenue collections are not even
sufficient to cover the total appropriations for the agencies with fiscal autonomy.

8 Rollo, p. 192.

9 Id. at 215 (underscoring supplied).

10 Constitutional Mandate on the Judiciary's Fiscal Autonomy.